Closing the Courthouse Door — Arbitration Rules

In Judiciary and Courts On

The Trump administration is moving to deny Americans their day in court when they have been wronged.

The Centers for Medicare and Medicaid Services want to reverse an Obama-era regulation that bars most nursing homes from forcing residents to agree to resolve disputes in private arbitration, instead of in court. The Department of Education recently announced that it was working to reverse an Obama-era rule that prevents most for-profit colleges and other schools from enforcing arbitration agreements when resolving loan disputes by students.

Now, congressional Republicans are getting into the act by attacking a new rule, issued by the Consumer Financial Protection Bureau, that will let Americans bring class-action lawsuits against banks instead of being forced into arbitration. Without the rule, which is scheduled to apply to transactions next year, banks could continue to profit from abusive products and practices without ever facing a court challenge, and aggrieved customers would continue to be shunted into arbitration. Class-action lawsuits are often the only way to hold corporations to account for wrongdoing in which thousands or millions of customers lose amounts that may be meaningful for each customer, though not enough to warrant an individual fighting a corporation. Arbitration, in contrast, is so clearly stacked against customers that most people don’t even bother. And yet, arbitration has been the only recourse even in cases where customers were defrauded, like those caught up in the still-unfolding scandals at Wells Fargo who could not sue because of the bank’s mandatory arbitration requirement.

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